Woolworths reshuffles its management

Woolworths has announced a number of key leadership appointments within its Food and Liquor divisions.

The changes follow the resignation of Tjeerd Jegen as Managing Director, Australian Supermarkets and Petrol.

Woolworths Chief Executive Officer, Grant O’Brien said: “We have appointed a new leadership team under Brad Banducci as Managing Director, Australian Food and Liquor.  

“Brad will continue to have responsibility for Woolworths Liquor Group until a new appointment has been made.  Martin Smith, General Manager of Dan Murphy’s, will act as Director of the Woolworths Liquor Group to provide additional support to Brad.

“Dave Chambers has been appointed Director, Woolworths Supermarkets, reporting to Brad.  Dave has been the Managing Director of Progressive Enterprises in New Zealand for the last four years.  He is a highly experienced supermarket retailer who has honed his skills in the tough and highly price‐sensitive market of New Zealand.

“This change places our best talent to lead our biggest businesses.  Together, Brad and Dave bring the right mix of experience and the ability to create a winning operating culture.  

“Steve Donohue has been appointed Acting Managing Director, Progressive Enterprises until a new appointment has been made.


Glass contamination fears prompt olive recall

Woolworths has issued a recall for its Homebrand Sliced Black Olives due to possible glass contamination.

Only the 430g jars of olives with a best before of 4 July 2016 are being recalled, no other products are affected by this recall.

The recalled product has been sold in Woolworths stores in New South Wales and Western Australia only. No other states or territories are affected by this recall.

It’s the first food-related recall for Woolworths for the year, with last year’s recalls including its range of Macro nut spreads due to undeclared traces of peanuts and tree nuts and a recall of its Select Finishing Sauce Caramelised Onion & Roasted Garlic Reduction 165g due to the presence of undeclared milk due to a packaging error.


Strong demand for seasonal foods

A study has found the majority of consumers consider seasonal food to be tastier, more cost effective and convenient to purchase than non-seasonal food.

The Good Business Sense National Eating Habits Study 2014 involved 800 participants in NSW, VIC, QLD and WA (the sample of which was representative of the age and population distributions in Australia), and also involved input from a number of expert nutritionists, Traditional Chinese Medicine practitioners, and food companies.

Key findings from the Good Business Sense National Eating Habits 2014 study include:

  • 76 percent of Australian shoppers consider seasonal food to be tastier than non-seasonal food
  • 69 percent of Australian shoppers agreed that seasonal foods were more cost effective
  • 55 percent of Australian shoppers thought seasonal foods were more convenient to purchase than non-seasonal food
  • Only 26 percent of Australian shoppers thought that seasonal food was better for the economy
  • 45 percent of Australian shoppers would not pay extra for seasonal food
  • 41 percent of Australian shoppers would pay up to 25 percent more for seasonal food
  • 42 percent of Australian shoppers think there is a suitable range of organic and seasonal food on the current market, 33 percent think there is not enough
  • 33 percent of Australian shoppers do not consider there to be enough seasonal or organic food on the market
  • 62 percent of Australian shoppers believe that markets have a good range of seasonal food, with 54 percent believing that Woolworths and 50 percent for Coles have a good range. Thomas Dux only rated 15 percent and IGA 17 percent
  • Woolworths was the most popular response for stocking a good range of seasonal food amongst the youngest age group 18-20, with 75 percent compared to the overall average of 54 percent
  • 66 percent of Australian shoppers said “no” to the belief that seasonal food needs to be organic to have seasonal benefits, while 34 percent said “yes”
  • Individuals place less emphasis on organically grown seasonal food as their age increases
  • ‘Seasonal food fills 50 percent of my shopping basket’ was found to be the most popular answer among Australian shoppers
  • 79 percent of Australian shoppers prefer seasonal food over non-seasonal food
  • 27 percent of those earning under $27K have no preference for seasonal food
  • The study also measured consumption patterns of pre-packaged foods finding that yoghurt was the most purchased at 70 percent, frozen foods were at 54 percent and instant noodles 39 percent
  • 62 percent of Australian shoppers said that artificial flavours in pre-packaged foods was the top reason for not purchasing them
  • 57 percent of Australian shoppers said nutritional labels were the most attractive packaging feature when buying a product for the first time
  • When it came to food labelling, “Easy to read and understand” got 45 percent of Australian shoppers, 32 percent for “size”, and 32 percent for “recipe ideas”
  • “Texture” of labels and packaging only received 14 percent, while “smell” and “illustrations” were each at 17 percent
  • Comments on packaging and labelling revealed: price, visibility of contents, and the origin of ingredients were attractive features

Good Business Sense founder and Managing Director Anne Roze said, “We found that consumers are not educated enough to understand that seasonal food could be better for the economy and environment. This offers huge potential from an educational perspective, with only around 25% of respondents currently recognising all the benefits of eating seasonably.”


Woolworths’ food and liquor sales reach $11b

Woolworths has reported a 3.9 percent Australian food and liquor first quarter sales growth on the previous year.

Woolworths said sales were below expectations, with trading softer in August and September. Growth was impacted by differences in the timing of promotional activities and the cycling of higher fuel discount activity.

There was a deflation in average prices of 2.0% for the quarter (Q4’14: deflation of 1.7%) when the effects of promotions and volumes are included. The standard shelf price movement index which excludes investment in promotional activity increased 4.6% for the quarter (Q4’14: 3.5%), impacted by the increase in tobacco excise and produce inflation resulting from tightened supply conditions.

Tjeerd Jegen, Managing Director of Australian Supermarkets and Petrol said: “We relaunched ‘The Fresh Food People’ in August and have continued to focus on being the first choice for Fresh food. In line with our strategy, Fresh sales for the quarter grew faster than Grocery. We have also extended our ‘Farmers’ Own’ milk range to Western Australia in partnership with Margaret River dairy farmers. Our Grocery business remains a key focus and we are confident our trading plans for the second quarter will deliver on the many opportunities.”

Brad Banducci, Managing Director of Liquor said: “The Liquor market continues to be subdued, in particular the Beer and Ready-To-Drink categories, with trading remaining highly competitive.

“During the quarter we continued to experience strong growth in Dan Murphy’s Online and launched ‘Dan Murphy’s Connections’…We also launched the BWS ‘200 Specials’ campaign which we expect to build on in the second quarter.”

Woolworths opened nine (net) Australian Supermarkets during the quarter bringing the total to 940, three (net) Dan Murphy’s bringing the total to 189 and six (net) BWS stores bringing the total to 1,222 (including both standalone and supermarket attached BWS stores).

Woolworths’ chief executive officer, Grant O’Brien said “While first quarter sales were lower than expected, we are confident that our trading plans will improve momentum in the second quarter which includes the key Christmas period.”

Coles’ 2015 first quarter retail sales results indicated a food and liquor sales growth 5.8 percent, but still fell short of Woolworths with $7.3 billion.


Grocery code needs to be enforceable: ACCC

The ACCC has called for issues around enforceability and coverage to be addressed in the proposed grocery code of conduct, before a conclusion is reached.

Addressing the Australian Food and Grocery Council’s Industry Leaders Forum in Canberra, ACCC Chairman Rod Sims said a code of conduct that provides clear rights and legally enforceable norms of conduct would be of considerable assistance to food and grocery industry participants.

“However, many of the protections of the proposed Code are qualified and retailers and suppliers are able to agree to ‘contract out’ of Code provisions,” Sims said.

“This raises an issue of whether the Code will address the problems which industry has identified if norms of conduct in the Code are able to be traded away, rather than always enforceable.”

Sims also backed recent comments made by the Chairman of the Productivity Commission that Australia should stick with its successful strategy of favouring the many over the few by focusing on removing barriers to competition generally, rather than pursuing policies that favour particular sectors.

“I agree with him completely. So, it seems, does the Harper Panel review.

“We strongly agree with the review panel that there is a need to reinvigorate Australia’s competition policy, and ensure that it evolves.”

Sims welcomed the Harper Competition Review Draft Report and discussed proposed areas of microeconomic reform where the food and grocery sector stands to benefit.

“On road infrastructure provision and pricing, we support the panel’s recommendation on introducing cost-reflective road pricing linked to road construction, maintenance and safety,” Mr Sims said.

“Importantly, more effective road user charges can be offset by lower fuel taxes which currently account for one quarter of fuel prices.

“The ACCC also welcomes the draft recommendations to deepen competition in liner and coastal shipping services. This will also reduce your production costs."

In discussing proposed microeconomic reform,  Sims rejected the notion all the low hanging fruit has been picked, and that all the really important reforms have been made.

“The reforms to shipping are low hanging fruit, and can be implemented quickly. And the road reforms are fundamental to our economy.”

Sims also welcomed the review panel’s consideration of Australia’s competition laws.

“In doing so, they have clearly had regard to established international approaches to setting the appropriate boundaries of such laws.  Australia’s competition laws are behind international best practice in important respects.”

Sims broadly welcomed the Panel’s recommendation on “concerted practices”, the misuse of market power, and in relation to merger assessment.

In reporting on the ACCC’s recent compliance and enforcement activities, Mr Sims listed outcomes in area of credence claims including beer, pork, honey and free-range eggs.

“When making promotional claims about food or grocery products, the ‘who’, ‘what’, ‘where’ and ‘how’ must be accurate.”


Woolworths recalls Homebrand mince and Honey Poppas

Woolworths has recalled Homebrand Beef Mince Regular 500g as it may contain soft blue food grade plastic fragments.

The recall only applies to mince sold in Woolworths stores in WA from 21 September 2014 with a best before date of 29 September 2014.

The supermarket has also recalled Woolworths Homebrand Honey Poppas 250g, with a best before date between 7 July 2015 and 1 August 2015.

The product has been sold in Woolworths and Safeway Supermarkets Nationally from 14 July 2014.

The recall is being conducted by the supplier, Hubbard Foods Pty Ltd and Woolworths as it may contain glass.


Supermarkets battle over price of bread

Coles, Woolworths and ALDI have all pushed the cost of a 650g store-brand loaf to 85¢ – about 4 cents per sandwich slice.

Woolworths lowered the cost of its Homebrand white bread last Thursday, and Coles dropped the price of its Smart Buy white bread on Friday. ALDI followed suit and lowered its price on Saturday.

Woolworths' media spokesman Russell Mahoney said the new price will not impact upon suppliers.

The price reduction is the lowest ever price on Homebrand white for Woolworths, which the supermarket said is in response to customer demand for value on everyday staples.

George Weston Foods supplies Woolworths' store-brand bread, which is baked in Australia.

According to Goodfood, Baking Association of Australia executive officer Tony Smith said the cheap cost of supermarket bread came at a cost to Australian bakeries. “Basically it's a disgrace. All they're doing is bastardising the industry. Bakers can't make a loaf for under $1.50,” he said.

“It puts the local baker out of business and people out of jobs. Small business doesn't need this at the moment.

For Coles, the 85¢ cost is a further reduction on the $1 price tag on Smart Buy bread from the Coles' “Down Down” campaign in 2011.

Coles communications manager Jasmine Zwiebel said there had not been any supply problems with the discounted Smart Buy bread. “Bread is a staple in Australian households and will always be a popular item on the shopping list. Therefore, we will continue to ensure we have the quantities required to meet customer demand.”

Tom Godfrey, head of media at Choice, said getting consumers into the supermarket is the primary purpose of these types of discounts, but that another possible reason for the discounting is the growth of Aldi supermarkets.
“Particularly in the eastern states, Aldi is increasing its market share, with more people getting very cheap items from the 1500 product lines they stock,” he said.

Godfrey also suggested that consumers should ensure they are getting value for their money. "Price is one thing but you've also got to look at quality of the products," he said.

The Senate inquiry into supermarket giant Coles’ decision to slash the price of milk to $1 a litre has found the dairy industry has not suffered as a result.

Similarly, in 2011 Coles, then Woolworths lowered the price of store-branded milk to $1, and experienced a backlack from dairy farmers, who said they will be pushed out of business, through “unsustainable” prices.

A senate inquiry, into Coles’ decision to slash the price of milk has found the dairy industry has not suffered as a result and the ACCC concluded there was no problem with Coles’ decision.


Duff beer banned from shelves

Homer Simpson’s favourite beer has been found in breach of the Alcohol Beverages Advertising Code and pulled from Australian shelves.

Woolworths, through its Dan Murphy’s and BWS stores, began stocking a replica of the cartoon brew in May, but was forced to can the cans this week, the Herald Sun reports.

 “The association of The Simpsons with the product name and packaging is so strongly entrenched in Australian popular culture that the name and packaging will draw the attention of under 18 year olds,” the ABAC panel decided.

“Measures to market the product without references to The Simpsons characters or images cannot be effective to overcome the strong and evident appeal of the product material to underage persons.”

Brewer Lion Nathan also produced their own Duff Beer in the 1990s but that ended when Twentieth Century Fox, which broadcasts The Simpsons, won a Federal Court battle over the brand’s trademark.

A Woolworth Liquor Group spokeswoman said the ABAC panel had accepted the retail chain was “committed to the standards of good alcohol beverage marketing”.

“We respect the panel’s adjudication and will discontinue the stock,” the spokeswoman said.


Woolworths profit reaches $2.45 billion

Woolworths, the nation's biggest retail group has delivered an 8.5 percent lift in full-year earnings to $2.45 billion.

According to ABC News, the supermarket would have been much stronger had it not taken on rival Wesfarmers with an expansion into hardware.

The result, struck against a 4.7 per cent lift in group sales to $60.8 billion, was slightly below analyst forecasts but within the company's guidance.

Shareholders were rewarded with a 1 cent lift in the final dividend to 72 cents, taking the full year payout to $1.37.

While 3 percent higher than last year, it’s a modest payout lift compared with many top 100 companies this reporting season, including rival Wesfarmers which showered its shareholders with a special dividend and capital return.

Earlier this month, Woolworths revealed that losses on its $2.6 billion home improvement division had blown out to $176 million and that the new Masters big box hardware operation would not turn a profit before 2017.

Woolworths chief executive Grant O'Brien says the company is committed to competing against hardware chain Bunnings.

“It was forecast from the very beginning that it would be some years to profitability, so there's no surprise in respect to that at all, and it is quite typical of building a new business, and particularly a chain business,” he said.

The result was driven by a 7.2 per cent lift in normalised earnings from its food, liquor and petrol operations even after petrol earnings declined almost 34 per cent after the competition regulator restricted the use of shopping discounts on fuel.

Liquor store sales rose 4.6 per cent to $7.4 billion, while hotels delivered a further $1.47 billion, a rise of 2.2 per cent and Big W sales dropped 3.1 per cent following a year of difficult trading conditions and price deflation, resulting in an earnings decline of 18.8 per cent to $152.9 million.

Chief executive Grant O'Brien was pleased with the result, but pointed to continuing work to lift the general merchandise and hardware divisions.

But he warned that trading conditions remained difficult with consumers concerned about economic uncertainty and cost of living pressures.


Crackawines calls for ACCC inquiry into Dan Murphy’s operations

Online wine retailer, Crackawines is calling for the Nation’s competition regulator to investigate alleged anti-competitive behaviour by Woolworths owned liquor giant, Dan Murphy’s.

The company’s chief executive, Dean Taylor says that the liquor giant is placing pressure on suppliers of Crackawines, and that an ACCC inquiry into the company’s behaviour is long overdue.

“As a challenger brand disrupting a large and established market, we always knew we’d get some pressure from Woolworths, but I guess we never realised just how dirty they would play,” Taylor told The Australian.

“I think Woolworths Liquor Group has become too powerful and needs to be broken up or at the very least put on a damn short leash. An Australian Competition & Consumer Commission inquiry into their behaviour is well overdue.”

Taylor’s comments however were refuted by a spokeswoman for Dan Murphy’s who pointed out that the liquor giant had signed a fairness and transparency agreement with the Winemakers Federation of Australia last week. She said that agreement was as a testament to the retailers commitment to “doing the right thing”.

“Cracka is a competitor of Dan Murphy’s,” the spokeswoman said. “We reject Mr Taylor’s un-evidenced statements.”

Woolworths is a dominant player in the domestic liquor market and according to The Australian, the supermarket will soon be launching Dan Murphy’s Connections to take a piece on the online wine segment which currently represents 10 percent of liquor sales.

Dan Murphy’s Connections is a consignment selling model where liquor producers will have products shipped direct to customers from their own premises via a national courier business, eliminating the need for costly storage expenses for inventory.

Connections will charge vendors 25 percent of the full retail price, plus GST together with a hosting fee of $49 a month after the first year – not dissimilar from the Cracka model. However Taylor says that unlike Connections, the Cracka model enables winemakers to have control over the price, whereas Dan Murphy's keep control via its lowest price guarantee.

“This effectively allows them to undercut any price in the market,” he said.

“No other retailer in the country can command terms like that, including Coles.”

The Woolworths spokesperson said that Dan Murphy’s Connections would have no exposure to the supplier’s wholesale price or their margin, as the supplier will only be advising Woolworths of a reasonable recommended retail price.

“In the event of the retail price being beaten due to competitor activity, both the supplier and Dan Murphy’s will receive a lower than expected return,” the spokesperson told The Australian.

“The burden of the discount to the customer is shared between the supplier and Dan Murphy’s.”


Aldi could catch up to duopoly: USB

Aldi could almost double sales in five years, putting pressure on Coles and Woolworths, according to a report from investment bank UBS.

The report suggests that is Aldi fixes problems such as lengthy checkout queues – caused by the number of customers – out-of-stock items and the quality of its fresh food, sales could reach $13 billion.

The research is based on Aldi’s progress over the last few years and the shopping habits of more than 600 individual consumers.

Aldi could increase sales from $5.3 billion now to $9.3 billion by 2019 by opening new stores along the east coast, attracting more customers to existing stores and expanding into Western Australia and South Australia, which it plans to do by 2016, The Sydney Morning Herald reports.

“Aldi’s entrance into Australia has been an overwhelming success,” said UBS analyst Ben Gilbert.

Gilbert said the privately owned German chain could grow sales by at least 12 per cent a year over the next five years and have as big an impact on the Australian grocery market as ­discounters have had in the UK.

UBS estimates Aldi will take between $250 million and $350 million of annual sales from each of Woolworths, Coles and Metcash over the next five years. This will crimp same-store sales growth at the major chains by between 1.1 percent a year (Woolworths) to 1.8 percent a year (Metcash).

Gilbert said Aldi’s impact on the market would be even greater if it improved customers’ perceptions, which have deteriorated since a ­consumer survey by UBS in 2010.

The survey found that 52 per cent, or one in two shoppers, in areas where Aldi has stores have visited it over the past month.

The chain, which initially appealed to poorer consumers with a limited range of house-brand groceries and a low-price strategy, is now attracting wealthier consumers and young ­families with children, who have higher expectations.

“Aldi’s [perception] scores have ­actually declined regarding the quality of fresh foods, always in stock and fast and efficient checkouts,” Gilbert said. “These are three areas the majors, Coles and Woolworths, have invested money in because they see it as a key opportunity to differentiate.

“So there’s a big opportunity for Aldi to improve perception of fresh foods, improve checkout queue times and improve the in-stock position to drive more frequency of shop and higher spend in store.”

The UBS survey found shoppers who rated Aldi poorly spent $580 a year, those who rated them well spent $820 a year and those who rated them great spent $1900.

Asked to respond to the report, Aldi’s joint group managing director, Stefan Kopp, said UBS’s market share, sales and store numbers were “pretty much in the ball park”.

“Nine billion [dollars in sales] is achievable and slightly optimistic. I wouldn’t go beyond that,” he said. “We have 350 stores and we plan to open 25 a year for the next years. Most of those new stores will be fill-in stores and they’ll take some sales away from existing stores.”